2000 Annual Report

KUDELSKI GROUP
ANNUAL REPORT
conception, coordination:
KUDELSKI SA
Desrochers Communication
22, route de Genève
design:
CH -1033 Cheseaux
www.messischmidt.ch
Tél. + 41 21 732 01 01
Fax + 41 21 732 01 00
photography:
Harmen Hoogland
E-mail [email protected]
www.nagra.com
© Kudelski Group
KUDELSKI GROUP ANNUAL REPORT 2000
Printed in Switzerland
KUDELSKI GROUP
ANNUAL REPORT 2000
CONTENTS
3
Introduction
BROADBAND NETWORKS
4
Message from the President
51 New fields for development
6
Key figures
52 Kudelski and digital security
8
Kudelski Group companies
54 Which types of broadband networks?
9
Organization chart
56 New security issues
10 Management and Board of Directors
57 Nagravision: the solutions
THE YEAR 2000
SMART CARDS
17 Evolution of the Kudelski share
65 Diversification of a proven technology
20 Internal developments: controlled expansion
66 Physical access control systems
22 Reinforcement of non-TV activities
70 Systems using relational databases
AT THE HEART OF CONVERGENCE
NAGRA AUDIO
29 The establishment of a digital infrastructure
77 A stimulating environment
30 Kudelski, convergence already at work
78 Expanding the professional range
80 Nagra Hi-Fi: for the beauty of music
CORE BUSINESS – DIGITAL TELEVISION
33 Nagravision: open architecture systems
86 Historical background
36 Secure access to infrmation
87 Directory
42 Nagravision worldwide in 2000
THE KUDELSKI GROUP OFFERS ITS TECHNOLOGICAL SOLUTIONS
ACROSS FIVE CONTINENTS, WHEREVER SECURITY REPRESENTS
A KEY CHALLENGE IN THE FIELD OF INTERACTIVE DIGITAL
TRANSACTIONS.
THE GROUP IS A LEADING PLAYER IN ACCESS CONTROL SYSTEMS AND IN SECURE MANAGEMENT SOLUTIONS FOR DIGITAL
AND ANALOG TELEVISION AS WELL AS IN CONTENT SECURITY
SYSTEMS FOR BROADBAND NETWORKS.
KUDELSKI ALSO DEVELOPS INTEGRATED SMART CARD-BASED
SOLUTIONS WHICH CAN BE USED IN ALL TYPES OF IDENTIFICATION AND AUTHENTICATION SYSTEMS REQUIRING A HIGH
DEGREE OF SECURITY.
RENOWNED FOR THEIR EXCELLENCE AMONG PROFESSIONALS
AND AUDIOPHILES THROUGHOUT THE WORLD, THE PRODUCTS
OF THE NAGRA AUDIO DIVISION DEMONSTRATE THE KUDELSKI
GROUP’S COMMITMENT TO ITS LONGSTANDING CUSTOMERS.
3
ANNUAL REPORT 2000
4
KUDELSKI GROUP
MESSAGE FROM
THE PRESIDENT
In the space of ten years, the Kudelski Group has
They are global, as there are no longer any major tech-
increased its turnover by a factor of more than fifteen
nological barriers between the different regions of the
while profitability has shown continuous improvement.
world. They are local, because by adopting the tactic
This strong growth represents proof of the fundamental
of vertical integration, certain European operators have
transformation the business has been through.
turned themselves into competitors where once they
were potential customers of the Group: thus markets
Examined firstly from the perspective of the industry,
are becoming almost closed to free market competition.
having been a manufacturer of professional recorders
operating in a niche market, Kudelski has become a lead-
Against this background, the Kudelski Group took a
ing player in the global field of the television of the future
decision relating to strategic positioning by devoting its
and broadband Internet. The same principle applies
attention primarily to the North American market in order
when it comes to financial structure: a family firm head-
to be better placed to return to its natural homeland:
ing for increasing levels of debt has turned itself into
Europe. In 1996, Nagravision was perceived to be active
a financially secure group that is quoted on the SMI,
exclusively in the North American digital television sector.
the blue chip index of the Swiss stock market.
By 2000, it was Europe that clearly held pole position.
When the obstacles are to be found outside the business,
In a manner that has sometimes been imperceptible
sometimes you need to have the courage to change tack,
to those outside the company, the Kudelski Group has
the better to make progress.
taken up challenges as numerous as they have been
varied. In the early 1990s, these primarily concerned
For the Kudelski Group, the financial year 2000 involved,
internal and financial aspects of the business. For the
to a certain extent, reaping the rewards of the strategy
past five years they have consistently come from outside,
implemented over the preceding years. Not only did we
relating to markets that follow rules which are both
record strong growth, and excellent profit levels into the
global and local.
bargain, but also, remaining faithful to our fundamental
principles, we were able to negotiate the stock market
turbulence of the year 2000 relatively unscathed.
5
In essence, our central belief remains the same: we must
As regards our competitors, over the coming months it is
give priority to our long-term vision while putting the
probable that we will see a consolidation among digital
emphasis on customer satisfaction. In fact, it is vital that
television equipment suppliers. Thanks to its strategic
we continue to make progress that is based upon pros-
position and excellent financial health, the Kudelski Group
perity, the crucial element that guarantees the profitability
will probably come out of this process all the stronger,
of everyday business. It is in this manner that we will be
in the meantime formulating an aspiration: to generate
able to maintain the required degree of detachment from
50% of our income from outside current areas of activity
the climate of the stock market and the volatility that is
within five years, whether through the development of
its trademark.
new projects or through acquisitions.
The fact that the Kudelski Group has successfully nego-
In the future, as in the past, we shall continue to strain
tiated the stormy waters of the year 2000 does not in any
every sinew to meet the needs of our customers, our
way mean that the future is all mapped out. Growth can
investors and our people. This will certainly be no easier
be very rapid, but this trend can switch into reverse just
in 2001 than it has been in the past – but where there
as rapidly. We must be particularly attentive to develop-
are new risks, there are also new opportunities.
ments in our customers’ needs: sudden changes can take
place in their market or in their approach to that market.
We must therefore take account of all the parameters
that may affect the challenges they face, notably the
demands of the financial sector.
Among the changes anticipated, we believe that we are
heading for a thinning out process among new TV operators, particularly in the United States. As long as this
means a simplification in the structure of the market, this
trend will not place a brake on the growth in subscriber
numbers and will not have any real consequences for us.
Furthermore, we see Asian and European markets as
offering many new opportunities for our systems; we can
expect these to stimulate our future growth.
André Kudelski
ANNUAL REPORT 2000
6
KUDELSKI GROUP
KEY
FIGURES
STRONG PROGRESS IN RESULTS
TOTAL INCOME + 67%, OPERATING INCOME + 87%
NET INCOME + 88%, CASH FLOW + 54%
2000
1999
1998
1997
1996
1995
359 527
214 737
112 323
107 739
66 913
39 086
OPERATING INCOME
75 405
40 388
25 038
17 195
5 816
6 105
NET INCOME
66 618
35 427
16 468
10 109
2 759
2 201
CASH FLOW
80 450
52 160
32 901
22 270
9 988
9 015
INTERESTS
693 156
154 208
111 464
56 808
45 825
30 692
NET CASH
543 611
58 663
47 609
10 390
4 637
-14 149
425
239
170
141
109
98
TOTAL INCOME
EQUITY INCL. MINORITY
NUMBER OF EMPLOYEES
(financial data in kCHF)
359 527
360 000
240 000
214 737
107 739 112 323
120 000
66 913
39 086
TOTAL INCOME
0
1995
1996
1997
1998
1999
2000
75 405
75 000
50 000
40 388
25 038
25 000
17 195
OPERATING INCOME
6 105
5 816
1995
1996
0
1997
1998
1999
2000
75 000
66 618
50 000
7
35 427
25 000
16 468
10 109
NET INCOME
0
2 201
2 579
1995
1996
1997
1998
1999
2000
80 450
75 000
52 160
50 000
32 901
25 000
CASH FLOW
22 270
9 015
9 988
1995
1996
0
1997
1998
1999
750 000
2000
693 156
500 000
250 000
EQUITY INCL. MINORITY
INTERESTS
111 464
30 692
45 825
56 808
1995
1996
1997
154 208
0
1998
1999
600 000
2000
543 611
400 000
200 000
NET CASH
0
4 637
10 390
1996
1997
47 609
58 663
1998
1999
-14 149
1995
2000
ANNUAL REPORT 2000
8
KUDELSKI GROUP
KUDELSKI GROUP
COMPANIES
NAGRAVISION SA
For the same partners: direct support, maintenance,
Comprises two divisions carrying out different activities:
security and development of new solutions to respond to
NAGRAVISION (DIGITAL)
the rapid development of the American satellite market.
Integrated conditional access systems, mixed secure
solutions for the management of pay television and multi-
NAGRA ID SA
media services. Security solutions for the distribution of
Company equally-owned with Thermoplex F. Droz (CH).
digital content over broadband Internet.
Development and production of modules and smart cards
NAGRA AUDIO
for contactless identification systems.
Portable analog and digital recorders for professionals;
prestige Hi-Fi equipment.
MEDIACRYPT AG
Company equally-owned with Ascom (CH).
NAGRACARD SA
Fundamental encryption technology (based upon Ascom’s
Security technology using smart cards for digital televi-
IDEA™ algorithm) for secure digital television and broad-
sion and, by extension, for applications such as physical
band Internet transmissions as well as for copyright pro-
access systems, e-commerce, cyber-administration,
tection in the media industry.
health cards etc.
SPORTACCESS KUDELSKI SA
PRÉCEL SA PRÉCISION ÉLECTRONIQUE
“Hands-free” ticketing and access control systems using
Assembly of electronic circuits and manufacture of
smart cards for installations such as ski-lifts, stadia,
mechanical parts, notably for the Kudelski Group’s
baths, amusement parks etc.
needs.
POLITICAL RIGHTS SA – POLIRIGHTS
NAGRA+
Secure interactive communication solutions for the use
Company equally-owned with Canal+ (France).
of governments and public administrations (e-voting,
Analog pay television systems.
cyber-administration).
NAGRASTAR LLC
E-PRICA SA
Company equally-owned with EchoStar (USA).
Company equally-owned with Galenica (CH).
Conditional access and smart cards used by EchoStar’s
Personalized health card system for secure access to
Dish Network American satellite television system and
data from the “health” file of each patient.
EchoStar’s affiliated companies.
KUDELSKI GROUP
KUDELSKI SA
NAGRAVISION
ASIA/PACIFIC
(SINGAPORE)
NAGRAVISION CHINA
(SHANGAI)
NAGRAVISION INDIA
(GURGAON)
DIGITAL TV
NAGRAVISION
NORTH AMERICA
(EL SEGUNDO,CA)
NAGRAVISION BRAZIL
(SAO PAULO)
NAGRAVISION IBERICA
(MADRID)
NAGRA AUDIO
NAGRA FRANCE SÀRL
(PARIS)
NAGRA ITALIA SRL
(ROME)
NAGRA USA INC.
(NASHVILLE, CT)
NAGRA KUDELSKI
(GB) LTD.
(ST. ALBANS)
NAGRA KUDELSKI GMBH
GERMANY
(MUNICH)
NAGRAVISION SA
100%
NAGRACARD SA
100%
PRÉCEL SA
SPORTACCESS
POLIRIGHTS
100%
KUDELSKI SA
POLITICAL RIGHTS SA
54%
66%
NAGRASTAR LLC
NAGRA+
E-PRICA SA
50%
50%
50%
MEDIACRYPT AG
NAGRA ID SA
50%
50%
9
ANNUAL REPORT 2000
10
KUDELSKI GROUP
MANAGEMENT AND
BOARD OF DIRECTORS
BOARD OF DIRECTORS
MANAGEMENT
André Kudelski
André Kudelski
Chairman of the Board and Chief Executive Officer
President and Chief Executive Officer (CEO)
Norbert Bucher
Adrienne Corboud Fumagalli
Board Member
Corporate Secretary
Laurent Dassault
Charles Egli
Board Member
Chief Operating Officer (COO)
Patrick Fœtisch
Nicolas Gœtschmann
Board Member
Chief Financial Officer (CFO)
Stefan Kudelski
John Markey
Board Member
Chief Marketing Officer (CMO)
Gérard Limat
Jean-Jacques Duvoisin
Board Member
Vice-President Finance and Administration
Claude Smadja
Philippe Stransky
Board Member
Senior Vice-President R&D and Projects (CTO)
Michel Varonier
Vice-President Operations
Claude Werner
Vice-President Production & Logistics
11
André Kudelski
Adrienne Corboud Fumagalli
Charles Egli
Nicolas Gœtschmann
John Markey
Jean-Jacques Duvoisin
Philippe Stransky
Michel Varonier
Claude Werner
TRAINING – KNOWLEDGE TRANSFER, INTEGRATION OF NEW PARTNERS, ACQUISITION OF A COMMON
VOCABULARY, LISTENING TO QUESTIONS, PROVIDING ANSWERS, INFORMING, GUIDING, PROVIDING
CONTACTS, EXPLAINING, TALKING
PERSONALIZATION OF SMART CARDS – FORECASTING AND ANTICIPATING REQUIREMENTS, PLANNING,
RAPID RESPONSE, CUSTOMER SATISFACTION, STOCK MANAGEMENT, REDUCING TURNAROUND TIMES,
REDUCING COSTS, PERSONALIZATION, QUALITY CONTROL, DISPATCH
THE YEAR 2000
EVOLUTION OF THE
KUDELSKI SHARE
17
1986
1997
GOING PUBLIC
THE KUDELSKI PARTICIPATION CERTIFICATE,
Kudelski Group floated on the secondary market of the
A SHINING STAR OF THE STOCK LISTINGS
Geneva stock exchange.
The stock closes the year at CHF 7 250, an increase of
264%, thus producing the second best performance on
the Swiss stock market in 1997. The company’s market
1995
capitalization is increased fifty-fold.
ENTRY OF DASSAULT
The world-renowned French group Dassault takes a 25%
stake in Kudelski SA share capital.
1998
THE NEW CAPITAL STRUCTURE
As announced two years earlier, on 29th July 1998
1996
the 29 211 participation certificates are converted into
INCREASE IN SHARE CAPITAL
bearer shares, bringing the number of bearer shares
AND PARTICIPATION CAPITAL
in circulation on the market to 62 961.
The share capital is increased from CHF 3 million to
CHF 4 million and participation capital from CHF 1 661 600
CAPITAL INCREASE AND FIRST INDIRECT SPLIT
to CHF 2 921 100.
In view of the very strong growth in the value of the
stock, which attains new heights in 1998, a restructuring
At the same time, the public convertible loan of
of the capital is proposed at the first public general
CHF 15 million issued in 1986 is fully converted into
meeting of Kudelski SA shareholders on 26th October
participation certificates.
1998. The proposal is approved unanimously.
The share price is divided by six and quoted initially
at CHF 3 100 on 10th November 1998. This operation,
designed to promote the liquidity and accessibility of the
share, meets with unqualified success against a background of stock market turbulence.
3 000
2 500
2 000
1 500
1 000
500
SHARE PRICE EVOLUTION (IN CHF)
0
01
02
03
04
05
06
07
08
09
10
11
12
THE YEAR 2000
ANNUAL REPORT 2000
18
KUDELSKI GROUP
1998
The new share capital totals CHF 41 526 600, divided
1999
into 377 766 bearer shares (nominal value CHF 100) and
KUDELSKI STOCK QUOTED ON THE MAIN
375 000 registered shares (nominal value CHF 10).
SWX MARKET
In order to meet demand from numerous investors and to
This operation provides the company with more than
follow through on the Group’s commitments, from 2nd
CHF 34 million in fresh funds, thus allowing it to main-
August 1999 the Kudelski stock is quoted on the princi-
tain its growth and to successfully implement a strategic
pal market of the SWX Swiss Exchange.
investment policy.
STRONG MARKET PERFORMANCE FOR
FURTHER PLAUDITS FOR KUDELSKI STOCK
KUDELSKI SHARE
After the split carried out during the year, the stock
In the wake of 2 exceptional years, Kudelski stock
closes the year at CHF 3 800, an increase of 210%
succeeds in remaining at the forefront of the listings
making it the best performer on the Swiss stock market
in 1999, confirming the growing interest of numerous
over this period. The company’s market capitalization
institutional and private investors.
totals CHF 1 578 million at 31st December 1998.
The share closes the year at CHF 9 500, an increase
of 150%, putting it 15th in terms of annual performance
on the Swiss market, with shares in technology or with
an Internet component blazing a trail. The company’s
market capitalization totals CHF 3 945 million at 31st
December 1999.
01
1999
02
0
03
3 000
2 500
2 000
1 500
1 000
500
0
04
05
06
07
08
09
10
11
12
01
02
03
04
05
06
07
08
09
10
11
12
2000
01
02
03
2001
19
2000
1st OCTOBER 2000
CAPITAL INCREASE AND 2nd INDIRECT SPLIT
QUOTATION ON THE SMI (SWISS MARKET INDEX)
On 19th May 2000, at the Kudelski SA general share-
On 1st October 2000 Kudelski stock is incorporated
holders’ meeting, a capital restructuring proposal is put
into the SMI together with that of four other companies
forward. This proposal meets with unanimous approval.
(Julius Baer, Richemont, Serono and Unaxis).This share
index brings together the 29 Swiss blue chip companies.
The stock price is divided by twelve, leaving it at
CHF 2 371 on 24th August 2000. The operation carried
30th NOVEMBER 2000
is a great success.
INTRODUCTION ON THE MSCI (MORGAN STANLEY
CAPITAL INTERNATIONAL)
The new share capital totals CHF 499 177 200, divided
On 30th November 2000 Kudelski stock is incorporated
into 4 541 772 bearer shares (nominal value CHF 100)
into the MSCI. The MSCI is an index produced by
and 4 500 000 registered shares (nominal value CHF 10).
Morgan Stanley, comprising national indices to reflect
a world share market index. The ratio for each country is
This operation brings the company CHF 475 million in
calculated on the basis of their international economic
liquidity assets, allowing it to continue to grow and to
importance. The MSCI index is a source of reference
successfully pursue a policy of expansion through strate-
used greatly by foreign investors following different
gic acquisitions or investments.
national markets.
The stock closes the year at CHF 1 800, an increase of
117%, representing the best performance among SMI
stock and the 7th best performance overall.
The company’s market capitalization at 31st December
2000 totals CHF 8 985 million.
The bearer share is listed on the principal market of the
SWX Swiss Exchange.
Its reference number is P 073,404 (TK, DJT: KUD, R: KUD).
THE YEAR 2000
ANNUAL REPORT 2000
20
KUDELSKI GROUP
INTERNAL DEVELOPMENTS:
CONTROLLED EXPANSION
In 2000, the Kudelski Group once again experienced
For example, training designed for Nagravision customers
a year of strong growth; it continued to make progress
has been developed and formalized: thus, basic educa-
in adapting its organization to meet new challenges.
tion about the Nagravision system is now complemented
by modules covering specific products.
Increased staffing levels (almost 70 new colleagues,
outside acquisitions), a reinforced market presence,
The structural changes also apply to the Quality
services subject to constant improvement, new customers
Assurance division. This body, staffing for which doubled
and technological diversification all indicate the growth
in 2000, has brought its attentions to bear upon the
achieved by the Group, whose structures have evolved
growing complexity of the projects and products supplied
to meet new requirements.
by the Kudelski Group. Armed with 20 man years of
experience accumulated over time, it has continued to
refine its methods and to put in place ever more effective
A STRENGTHENING OF OPERATIONAL STRUCTURES
validation procedures designed to guarantee that Group
The Operations Department has put new structures in
products meet the highest possible quality standards.
place with a view to improving resource management,
making better use of existing synergies between different
departments and companies belonging to the Group,
simplifying the information flow between them and optimizing the quality of customer service.
More particularly, the R&D, Project Management and
Customer Care sections have been reorganized so as
to offer even better service in terms of quality, product
development times and delivery as well as site response
times.
INCREASED STAFFING LEVELS, A REINFORCED MARKET
PRESENCE, SERVICES SUBJECT TO CONSTANT IMPROVEMENT,
NEW CUSTOMERS AND TECHNOLOGICAL DIVERSIFICATION
ALL INDICATE THE GROWTH ACHIEVED BY THE GROUP, WHOSE
STRUCTURES HAVE EVOLVED TO MEET NEW REQUIREMENTS
21
HEADQUARTERS REFIT
DEVELOPMENT OF LOCAL NAGRAVISION BRANCHES
A general refit of the Kudelski Group headquarters,
Over the course of the year 2000, Nagravision has
located in Cheseaux-sur-Lausanne, Switzerland, took
continued to extend its market presence. In particular,
place, during which new work areas were created.
a Nagravision office, Nagravision Iberica, was opened
This allowed the organization to be redistributed more
in Spain and currently has 7 engineers.
rationally and new requirements to be met.
In Brazil, a branch was set up in Sao Paulo, with admiA new building, acquired in 1998 and located on an
nistrative support from a Brazilian company.
industrial estate not far from Group headquarters, is now
home to production activities, including those of the
Lastly, the Kudelski Group has beefed up its staffing le-
Nagra Audio division, as well as to the sales and market-
vels in Asia through the expansion of its Singapore
ing team for this sector; it is also here that the assembly
office, which manages the development of activities in
of Nagravision industrial product solutions and stock
the Asia-Pacific region and to which the Nagravision
management takes place.
agencies in India and China report.
Moving into new premises has helped to improve resource
management, facilitating the concentration of production,
on the one hand, and keeping the rapidly expanding development teams grouped together, on the other.
THE YEAR 2000
ANNUAL REPORT 2000
22
KUDELSKI GROUP
REINFORCEMENT
OF NON-TV ACTIVITIES
TRANSFER OF ACTIVITIES TO NAGRACARD SA
SPORTACCESS KUDELSKI SA
At the beginning of the year 2000, the activities of
SportAccess is the Swiss market leader in physical
Intelegis (a joint venture between Kudelski, Biwi and
access control as well as in ticketing for ski-lifts and
Trüb) were taken over by the company NagraCard SA.
sporting facilities.
The goal of this activity transfer was to optimize the
coordination of projects involving smart cards.
After the Kudelski Group had acquired a capital holding,
the business took control over the Austrian company
Systems AG, which holds a very strong position in the
INTEGRATION OF PRÉCEL SA INTO THE GROUP
market for physical access control in Austria, Germany,
The company Précel SA Précision Electronique was
Switzerland, Scandinavia and the Czech Republic.
integrated into the Kudelski Group. Précel SA responds
In particular, this company is the market leader in sub-
to the Group’s needs with regard to the manufacture of
sectors covering amusement parks, thermal baths,
electronic and mechanical components.
swimming pools and stadia. More than 600 sites across
Europe and throughout the world are equipped with its
access systems.
THREE NEW STAKEHOLDINGS
Over the course of the year 2000 and in early 2001,
The headquarters for the new SportAccess Kudelski SA
the Kudelski Group took holdings in three new companies:
Group is in Sion, Switzerland, and 75 staff are based
SportAccess Kudelski SA (54%), Polirights – Political
there.
Rights SA (66%) and e-prica SA (50%).
This center for expertise is destined to play a key
Kudelski offers these new companies its technology and
role in developments where the contactless smart card
its experience with regard to access control and smart
becomes the universal medium: in practice it will,
cards while the partners provide the additional staff.
for example, allow access to leisure facilities, for which
Thus, the Kudelski Group keeps its resources intact for
a package has been loaded onto the card in advance
its core business sector, digital television.
via the Internet by means of a digital decoder or using
a mobile phone.
POLIRIGHTS IS A TYPICAL EXAMPLE OF THE PROCESS THROUGH
WHICH DIGITAL CONVERGENCE IS OPENING UP NEW FIELDS INTO
WHICH THE KUDELSKI GROUP CAN TRANSFER ITS KNOW-HOW
23
POLIRIGHTS – POLITICAL RIGHTS SA
E-PRICA SA
At the beginning of the year 2001, the Kudelski Group
The creation of the company e-prica SA in February
took a 66% capital holding in the Swiss company
2001 marked a new phase in the diversification of
Political Rights SA – Polirights, based in Geneva. This
Kudelski technology towards fields located outside the
firm offers integrated solutions for secure home-based
digital television sector.
electronic voting and for interactive applications relating
to cyber-administration. Polirights solutions are aimed at
e-prica is an equal venture between the Kudelski Group
states and at national and regional public authorities.
and the Swiss pharmaceutical group Galenica Holding.
Its mission is to develop and market data communica-
The services that Polirights provides are based upon the
tions media such as smart cards designed to guarantee
concept of relational databases integrated into a smart
the protection of sensitive data in the field of health.
card – technology developed by Kudelski since 1995 –
combined with digital signature authentication and elec-
This partnership allows two highly complementary ranges
tronic certification techniques.
of expertise to be pooled: on the one hand there is
Galenica’s experience in the management of health-related
The system reconciles the need for reliability, security
information and on the other, Kudelski’s know-how in
and protection of privacy in all situations involving
relation to smart card-based systems for the secure dis-
a remote electronic relationship between government
tribution of information.
and citizens – for example when making a tax declaration, registering a child with a school or transmitting an
The first product to be made available will be the “e-prica”
electronic ballot paper.
card (electronic privacy card), a personal electronic
medium providing its holder with exclusive control over
Polirights is a typical example of the process through
data from their medical file. This file, kept in an
which digital convergence is opening up new fields into
“anonymized” and partial form in a relational database
which the Kudelski Group can transfer its know-how.
accessible via Internet, only attains its complete structure when accessed jointly with the relevant smart card.
DEVELOPMENT OF SMART CARDS – PROJECT MANAGEMENT, DEVELOPMENT OF NEW PRODUCT
SOLUTIONS, GUARANTEEING QUALITY OF THE SYSTEM, MOTIVATING A TEAM, PROVIDING CUSTOMER
SATISFACTION, PROVIDING SALES AND MARKETING SUPPORT
QUALITY ASSURANCE – CONTINUOUS IMPROVEMENT OF PRODUCT QUALITY, DRAWING UP PLANS,
PROCESS MANAGEMENT, OPTIMIZATION OF TURNAROUND TIMES, INTEGRATION OF COMPLEX
SYSTEMS, RESOURCE MANAGEMENT, VALIDATION OF CUSTOMER SOLUTIONS AND PLATFORMS,
MIGRATION/DEPLOYMENT OF SYSTEMS, ADMINISTRATION OF DOCUMENTATION
AT THE HEART OF
CONVERGENCE
THE ESTABLISHMENT OF
A DIGITAL INFRASTRUCTURE
29
MEDIA CONVERGENCE
BROADBAND NETWORK CONVERGENCE
Personal computers and the Internet have brought a sec-
Broadband networks are gradually taking over as they
tion of the population into the interactive era. The digital
allow for the interactive use of high-value digital content.
revolution is taking great strides towards democratization,
Thanks to this type of network, you can use a single line
gradually finding a place in every home. Today it includes
to access the Internet, television and radio programs,
such high-penetration communications media as televi-
e-commerce and the whole range of interactive services
sion, the telephone, handheld computers (PDAs); there is
the extent of which we are only now starting to appreciate.
a proliferation of multimedia terminals communicating
with one another and, like the Internet, open to an enor-
The speed of the network is a critical factor here: the
mous range of interactive services.
applications package, which often contains a continuous
flow of images, sound or data, requires a large capacity.
The ongoing introduction of broadband networks is
LANGUAGE CONVERGENCE
therefore an essential precondition for future progress.
As they share a common communication standard –
the Internet Protocol (IP) – these “domestic terminals”
The stakes are sufficiently high as to stimulate vigorous
are in a position to process images, sound or I.T. data
competition from every type of network operator, and
indiscriminately, all now brought together within a com-
they are providing ever more effective broadband pro-
mon waveband. In other words, these applications use a
ducts, whether in the field of cable, xDSL lines, fiber
universal language that liberates them from the different
optics, power line communication networks or Hertzian
media by which they travel. Watching television on your
channels.
PC, accessing the Internet on your TV set, receiving
a video message on your mobile phone, taking part in
e-commerce over all these media: all this will soon form
part of everyday life.
CONVERGENCE
AT THE HEART OF
ANNUAL REPORT 2000
30
KUDELSKI GROUP
KUDELSKI, CONVERGENCE
ALREADY IN PROGRESS
PROVEN EXPERIENCE
NEW MARKETS
Throughout the world, digital TV network operators are
With convergence, the Kudelski Group’s know-how is
developing infrastructures allowing them to supply their
expanding through a natural evolution into other sectors
subscribers with the first interactive services.
where interactivity is being developed, notably broadband networks. Therefore, its technology may be used
Suppliers of such infrastructures set up on their platforms
in new applications and with new partners operating
the different systems allowing them to manage content
outside the field of digital TV.
and ensure the security of transactions. It is here that
Kudelski’s conditional access solutions come into play,
This is also true for smart cards, which have traditionally
as thanks to their open architecture they are easily inte-
been used with the Kudelski conditional access systems
grated into all environments.
and are now proving to offer the perfect security
response in many new situations.
It is now 12 years since the Kudelski Group introduced
its first security solutions. It has a proven track record in
Kudelski is also a leading player in the field of encryption
the secure distribution of content over networks that
techniques, providing the safest systems now available.
have millions of subscribers, a record few in the world
Here again, there is a continuous proliferation in the range
can match.
of applications for which they can be used.
To conquer the convergence markets, in addition to the
technological assets that the Group has, one can also
add the fact that the company rests upon a structure
that is independent from broadcasting or media groups
which guarantees a great capacity for openness vis-à-vis
customers in a sector that is fiercely competitive.
WHAT IS CONVERGENCE? A MULTIPLICITY OF DIGITAL CONTENT
TRANSMITTED OVER A SINGLE NETWORK AND AVAILABLE FROM
ALL TERMINALS: MOBILE PHONE, TV, PC, PDA
31
CORE BUSINESS
DIGITAL TELEVISION
NAGRAVISION: OPEN
ARCHITECTURE SYSTEMS
33
ONE OF THE WORLD LEADERS FOR CONDITIONAL
TOWARDS UNIVERSAL INTEGRATION
ACCESS SYSTEMS
Based on industry standards as regards the transmission
Nagravision is a market leader in the field of conditional
of digital streams (DVB, ATSC, MPEG-2), Nagravision
access for digital TV and broadband Internet. Leading
conditional access solutions are designed according to
operators are equipped with its technology which ensures
a completely open architecture: they can therefore easily
secure access to their services via more than 25 million
be integrated into the platforms of TV operators and
decoders (analog and digital).
can meet the demands of businesses working over mixed
systems such as satellite/cable, MMDS/cable, etc.
Today the range of Nagravision solutions includes
systems for:
Nagravision solutions, which can easily interface with
– information access security – for the operator
other technology, do not impose any constraint upon
(encryption and access rights) and the end-user
operators in their choice of other components in the
(decryption through the decoder/smart card pair)
transmission-reception chain. They are modular, which
– content and subscriber management
facilitates the upgrading required due to the constant
– management and security for interactivity over IP
evolution of technology and markets.
networks
The market is also heading towards the implementation
Nagravision also plays the much appreciated role of
of the MHP (Multimedia Home Platform) norm, which
global integrator for operators wishing to entrust the
covers decoder technology (software interfaces and
implementation of a “turnkey system” to a single company.
applications) more specifically. This norm will facilitate
the opening up of markets by defining the standards that
will allow viable applications to be developed whatever
the middleware selected.
Nagravision observes the market attentively so as to
be in a position to respond to customers’ demands for
decoders that employ the MHP norm within as short
a timescale as possible.
DIGITAL TELEVISION
CORE BUSINESS
ANNUAL REPORT 2000
KUDELSKI GROUP
34
OPENNESS THAT IS FAVORABLE TO PARTNERSHIPS
Strategic alliance between Nagravision and Liberate
Nagravision’s strategy of technological integration with
Technologies. The two companies have developed an
the platforms of leading players in the digital television
advanced interface encompassing the Nagravision
industry has continued to take shape in 2000 through a
conditional access system and Liberate’s TV Platform™
whole series of cooperation agreements. Here is a brief
software. The combination of these two products,
overview of these:
presented in a pre-integrated form, allows the reduction
of timescales for the commercial launches of products by
SUPPLIERS OF MIDDLEWARE AND INTERACTIVE
operators supplying top-of-the-range interactive televi-
APPLICATIONS
sion services.
Agreement with Microsoft for the integration of the
Nagravision conditional access system with the Microsoft
TV ® operating platform. The two companies plan to offer
common, complete and secure solutions in the field of
digital and interactive television operating systems for
satellite, cable, MMDS and terrestrial transmissions.
NAGRA+: ANALOG AS A PRELUDE TO DIGITAL
The strategic position that the Kudelski Group holds in the field of digital security systems is based upon
its extensively proven track record in conditional access systems for analog television.
A joint venture between Kudelski and Canal+, the company Nagra+ enjoys a dominant position in the analog
sector, especially in Europe.
In particular, Nagra+ analog solutions are used to equip companies belonging to the Canal+ group in France,
in Spain and in Poland, as well as in Africa and the West Indies. Turkey, too, represents a significant market
for Nagra+ and its customers there, TeleOn and Multicanal, have been recording good levels of growth.
While the analog sector remains relatively stable in Central Europe, there is still potential for progress in
emerging markets.
ONE OF THE WORLD LEADERS FOR CONDITIONAL ACCESS SYSTEMS,
NAGRAVISION IS A MARKET LEADER IN THE FIELD OF CONDITIONAL
ACCESS FOR DIGITAL TV AND BROADBAND INTERNET. LEADING
OPERATORS ARE EQUIPPED WITH ITS TECHNOLOGY
35
HEADEND
SOLUTIONS
Global turnkey pay TV systems supplied by Nagravision
Strategic agreement between Nagravision and Diva,
and Scopus Network Technologies, a leading supplier of
a major supplier of interactive video-on-demand (VOD)
headend technology.
products and services.
Integration of Nagravision and BarcoNet product lines.
The Nagravision pre-encryption technology chosen for
BarcoNet is a supplier of distribution systems (head-
this solution protects digital content at every stage of the
ends, high speed fiber optics systems, network manage-
transmission process and provides for a shorter launch
ment and digital television distribution) specializing in
period, thus meeting the needs of digital television
broadband applications.
operators.
Nagravision’s secure VOD solution can be integrated
DECODERS
with the interactive products and services of other part-
Presentation by Nagravision and Pioneer of an integrated
ners, notably Compaq, and EMC2, market leaders in
system including Nagravision conditional access tech-
broadband multimedia solutions, as well as with those
nology on digital decoders from the Pioneer Voyager™
of Ncube and SeaChange.
range. These are designed for interactive broadband
cable television.
This joint project reflects the Kudelski Group’s willingness to provide customers with an ever greater choice
over the security and interactivity of systems. To this end,
Nagravision’s systems thanks to their open architecture,
can be integrated with the products of an ever-growing
number of decoder suppliers – around thirty at present.
DIGITAL TELEVISION
CORE BUSINESS
ANNUAL REPORT 2000
36
KUDELSKI GROUP
SECURE ACCESS
TO INFORMATION
25 MILLION SECURE DECODERS THROUGHOUT
For the consumer, it is no longer a case of “going and
THE WORLD
searching for” interactive services on equipment whose
The Conditional Access System (CAS) lies at the
functions they are sometimes unfamiliar with. On the
heart of the solutions used by TV operators across five
contrary, these services are offered to them on the equip-
continents.
ment with which they are most familiar: their television set.
It manages transactions and interactivity and ensures
In marketing terms then, this ensures the conditions are
that only subscribers who have paid for a service can
in place for the creation of a true mass market.
gain access to it. This function is even more crucial now
that digital television is bringing about a real explosion in
Continuous improvements are being made to the overall
the number of channels and the establishment of new
conditional access system and to the elements asso-
interactive services such as video on demand.
ciated with it (management modules such as IMS and
SMS, smart cards, interactive applications etc.). Over
the year 2000, therefore, new functions were added to
DIGITAL TV: THE FUTURE FOR INTERACTIVE SERVICES
these products, substantially expanding Nagravision’s
Digital television provides much more than an improve-
offer, without this having any impact upon the profitability
ment in image and sound. Thanks to the new potential
of the company’s resources.
for interactivity that it offers, it brings multimedia services
to the very heart of the home.
In general, the evolutions have principally involved the
development of capabilities linked to interactivity and the
optimisation of operational functions.
200 MILLION DIGITAL TV SETS BY 2005
Digital television is still in its infancy. Currently estimated to account for less than 5% of the market,
this figure should rise to between 15% and 20% by 2005.
This means that, by 2005, there will be digital TV sets in more than 200 million homes, of which around
180 million will have interactive functions (source: Strategy Analytics).
DIGITAL TELEVISION PROVIDES MUCH MORE THAN AN IMPROVEMENT IN IMAGE AND SOUND. THANKS TO THE NEW POTENTIAL
FOR INTERACTIVITY THAT IT OFFERS, IT BRINGS MULTIMEDIA
SERVICES TO THE VERY HEART OF THE HOME
37
SMS – STREAMLINED SUBSCRIPTION MANAGEMENT
Subscriber management requires the operator to put a
One of Nagravision’s central activities in 2000 involved
telephone exchange in place, through which users make
the development, by the SMS unit, of a Web server
their purchases. However, in certain situations where
linked to the subscriber management module.
there is a high level of demand for mass audience programmes – football matches, for example – the exchange
The SMS (Subscriber Management System) is in some
can sometimes reach saturation point.
ways the administrative engine of the conditional access
system. It manages the subscriber database and the dif-
Thanks to the SMS Web server, subscribers order the
ferent operations carried out on subscriber accounts:
broadcast of their choice independently and “on impulse”,
purchases, invoicing, subscriptions etc. It also generates
directly through their decoder/smart card or their per-
authorizations for access to programs.
sonal computer. The orders are then sent to the operator’s
SMS through the conditional access system.
ENCRYPTION METHODS : PROVIDING EVER GREATER SECURITY
THE MOST SECURE SOLUTION ON THE MARKET
The performance levels of Kudelski encryption methods represent one of the company’s greatest assets.
Through its joint-venture company MediaCrypt AG, Kudelski offers licences using the IDEA™ algorithm with
a 128 bit key, reputed to be the most secure on the market and used in encryption modules and smart cards.
PRE-ENCRYPTION AND COPYRIGHT PROTECTION
Over the year 2000 Nagravision developed technology for the pre-encryption of digital content, thus
ensuring security of data stored on the server of the content provider, namely right at the beginning of the
transmission chain.
In particular this technique responds to concerns over copyright protection in the context of applications
such as video on demand, distance learning, multimedia on demand over broadband networks etc.
DIGITAL TELEVISION
CORE BUSINESS
ANNUAL REPORT 2000
KUDELSKI GROUP
38
Aside from the convenience that this brings for the
TSS – CONTENT PLANNING
customer, this system alleviates the burden of operators
The TSS (Traffic & Scheduling System) system is a tool
enormously, particularly at telephone exchanges.
providing the operators with the means to exercise better
control over the planning of their platform’s multimedia
Nagravision SMS solutions are used by Cablecom
content and automated functions. Placed well upstream
(Switzerland), Polsat (Poland), Quiero TV and RTVE
of broadcasting installations, it is used in particular to
(Spain), GVB and PMSI (Philippines), DVBH (9 systems
manage operations allowing a given procedure to be
in China) and Sentech (South Africa). In addition,
started up automatically at an appointed time: for example
Métrociné (Switzerland) uses a system derived from the
to insert an advertising message or a competition ques-
SMS to administer transactions carried out using smart
tion relating to the film that is being shown.
cards.
The system thus ensures synchronization between the
broadcasting of multimedia content, audiovisual content
and conditional access.
Nagravision plans to adapt this platform to meet the
needs of Internet operators in view of professional applications such as distance learning, business-to-business
communications, etc.
A “TRUST CERTIFICATE”
Under PKI infrastructure, an operator grants “trust certificates” to subscribers whose record of payment for
purchases meets pre-established criteria.
When carrying out an e-commerce transaction, the user provides the reference details from their certificate,
the validity of which is verified on a centralized server. In addition, this verification serves the needs of the
purchaser, as a valid certificate also indicates that the vendor is worthy of trust.
Under this type of infrastructure, the conditional access system handles the dispatch of PKI certificates to
subscribers and their storage.
FOR THE CONSUMER, IT IS NO LONGER A CASE OF “GOING
AND SEARCHING FOR” INTERACTIVE SERVICES ON EQUIPMENT
WHOSE FUNCTIONS THEY ARE SOMETIMES UNFAMILIAR WITH.
ON THE CONTRARY, THESE SERVICES ARE OFFERED TO THEM
ON THE EQUIPMENT WITH WHICH THEY ARE MOST FAMILIAR:
THEIR TELEVISION SET
39
PKI – ATTRIBUTION OF CERTIFICATES FOR
EPG – ELECTRONIC PROGRAM GUIDE
E-COMMERCE APPLICATIONS
The distinctive feature of the Nagravision EPG
PKI (Public Key Infrastructure) has formed part of Kudelski
(Electronic Program Guide) is the fact that it is linked
systems since the early 1990s, ensuring the security of
to the conditional access system and therefore enables
transactions in respect of access to information.
interaction between the user and the operator.
For example, it authorizes the “impulse purchase” of
The PKI concept applied to e-commerce and t-commerce
a broadcast directly from the program guide. This appli-
represents one of the major developments introduced by
cation is therefore more than a simple list of channels.
Nagravision over the course of the year 2000.
The EPG is also of value to the operator, who can easily
This infrastructure involves offering subscribers the
provide subscribers with news about programs and new
option to purchase TV products (films, video on demand,
products that are available.
sporting events etc.) via the Internet or potentially via an
interactive decoder connected to the Internet, using a
The EPG application operates via a decoder equipped
personal certificate issued in advance by the operator.
with an open platform such as OpenTV. This type of
This procedure avoids the need to place orders through
solution is particularly relevant to the satellite market.
a telephone exchange, adding to customer convenience
For example, operators equipped with the Nagravision
and bringing about cost savings for the operator.
conditional access system, such as TeleOn in Turkey,
Polsat in Poland and 022 Télégenève in Switzerland use
The PKI concept is even more attractive since, in a pay
this interface.
TV environment, there is often a large volume of subscribers (sometimes running into millions), representing
Additionally, Nagravision is working on the development
a databank of customers who could potentially receive a
of a more sophisticated version of EPG, a “VOD/NVOD
certificate. This database is of real commercial interest.
Navigator”, which will allow the subscriber to purchase
Certificates created in this way are also of significant
a film and to view it immediately (in the case of VOD-
interest to companies involved in e-commerce.
Video On Demand) or almost immediately (in the case of
NVOD- Near Video On Demand). This product should
These features may generate additional revenue for television operators.
become available during the year 2001.
DIGITAL TELEVISION
CORE BUSINESS
ANNUAL REPORT 2000
KUDELSKI GROUP
40
VIDEO ON DEMAND – ONE OF THE FIRST INTERACTIVE
The Nagravision VOD system allows flexible product
APPLICATIONS
management through a variety of sales options:
Obtaining the movie of their choice at the time they have
– by the session, so that viewers can watch a film or
decided to is probably one of the first interactive features
a particular program once and at a specified time
that digital TV subscribers wish for. Such a service is an
– by subscription, so that viewers can watch as many
advantageous substitute for the hiring or purchasing of
films as they wish over the period for which they
physical media such as video cassettes or DVDs.
subscribe
– by “window”, that is to say for a specified period
(a given number of hours) during which the viewer can
After several operators spent a trial period working with
watch several films
restricted groups of subscribers, Video On Demand
(VOD) has entered its marketing phase.
– by time slot, where a given film can be viewed several
times
THE CONDITIONAL ACCESS SYSTEM AND THE SMART CARD: AN EVER MORE EFFECTIVE PAIR
The technological evolutions of the smart cards and of the conditional access system translate into
a multiplicity of new functions that are available to the user:
– the management of complex subscription options. For example: differential rates based upon marketing
criteria or purchases by time unit
– the management of several different user profiles on a single card: for example family cards with parental
control, credit limits per user for impulse purchases etc.
– access to sample viewing windows (e.g. 10 minutes unscrambled coverage from a live match)
– security for on-line shopping transactions (e-commerce)
OVER THE YEAR 2000, NEW FUNCTIONS WERE ADDED TO THE
PRODUCTS, SUBSTANTIALLY EXPANDING NAGRAVISION’S OFFER
41
On a technical level, VOD operates according to three
NEW GENERATION SMART CARDS
encryption techniques, each of which has its particular
Produced by another Kudelski Group subsidiary,
advantages:
NagraCard, the smart card plays an essential role in
– pre-encryption on the operator’s server: the content
Nagravision’s high-security digital TV solutions.
is encrypted at the same time as it is digitized on the
Programmed to act as a barrier authorizing or prohibiting
MPEG flow. This system forestalls hacking of the server
access to a given service, the smart card also acts as a
and of the distribution of the content
security platform for interactive applications such as on-
– The storage of encrypted movies on the decoder,
which must in this case have a hard disk. This solution
line shopping, games and banking transactions, and even
as a means of payment.
is suited to satellite operators as no return path is
required
– encryption “on the fly”: a movie is encrypted
A number of developments have been carried out by
NagraCard over the last two years regarding both the
at the same time as it is broadcast – a system that is
smart card hardware (increase in memory capacity) and
particularly well-suited to live broadcasts
software (introduction of new functionality).
In September 2000, Nagravision reached agreement with
Aside from increased security, the new generation of
Diva, a major supplier of VOD products and services,
smart cards offers additional functions to manage
on the development and marketing of a secure platform
impulse product purchases: during the monthly billing
based upon pre-encryption technology and designed for
procedure, for example, the card lists the purchases –
use with on-demand services.
which have been temporarily debited over that period on
a “credit of trust” – and calculates the total amount due.
The launch of the first Nagravision VOD management
platforms is of particular strategic significance. In fact,
These products can now range from a simple film to
the concept is fully transferable to the distribution of
complex subscriptions to several channels or to series of
other types of on-demand content (games, MP3 music,
events (drama/film serials, sporting seasons etc.).
software) on broadcast or broadband networks (fiber
optics, DSL etc). Over the next few years, therefore, this
Operators whose offering includes e-commerce as well
infrastructure is destined to play a significant role in the
as the traditional television services particularly appre-
rapid development of MOD (Multimedia On Demand) as
ciate the flexibility that the card offers and the savings on
well as in interactive applications.
administration costs that it allows them to make.
DIGITAL TELEVISION
CORE BUSINESS
ANNUAL REPORT 2000
42
KUDELSKI GROUP
NAGRAVISION
WORLDWIDE IN 2000
THREE FACTORS FOR SUCCESS
In addition, the Spanish cable operator Ono has started
On a commercial level, the Kudelski Group’s progress
to broadcast digital services. This represents the first
over the year 2000 was the result of three factors:
stage in a wide-ranging operation that will include
– the deployment of systems for new customers
numerous channels as well as interactive services.
– the development of relationships with longstanding
Equipped with a Nagravision system, Ono is one of the
customers who are expanding their services, and thus
first operators to launch digital services via cable in
their technological platforms
Spain.
– the expansion into security technology for digital
content distribution over broadband networks.
In Spain again, but in the satellite sector, TSA (Telefonica
de Sistemas Audiovisuales) has once again selected
The Group has been very active and has continued to
Nagravision for a new service designed specifically for
increase its market share worldwide.
Spanish-speaking regions of Latin America.
SWITZERLAND CONTINUES TO PLACE ITS TRUST IN
EUROPE
NAGRAVISION
IBERIAN PENINSULA: DEVELOPMENTS IN THE DIGITAL
Adopted by Swisscable, the association of Swiss cable-
CABLE SECTOR
operators, and supplied to Cablecom and 022 Télégenève
Operators using Nagravision solutions continue to make
in 1999, Nagravision solutions equip 95% of the Swiss
good progress, whether in the satellite or in the terres-
market.
trial sector. In digital cable, two projects should be
mentioned:
This vote of confidence was strengthened still further in
2000, when the operator Valaiscom installed a Nagravision
TV Cabo Portugal, one of the leading cable operators
on the Iberian Peninsula in terms of its number of subscribers, chose Nagravision technology for its digital
cable network, having already adopted a Nagravision
system for its satellite services in 1998. This customer
plans to introduce decoders that bring together
Nagravision’s conditional access system and the
Microsoft TV ® platform over a fully interactive cable
network.
digital terrestrial system.
THE GROUP HAS BEEN VERY ACTIVE AND HAS CONTINUED TO
INCREASE ITS MARKET SHARE WORLDWIDE
43
NORTH AMERICA
On the technical level, a massive upgrading of the
ECHOSTAR: A SOLID PARTNERSHIP
EchoStar system is planned for the year 2001. Namely,
After Europe, North America represents the most impor-
the improvements will include a more modular design,
tant market for the Kudelski Group. The United States
enhanced performance levels, extra management tools
in particular, where in 1995 Nagravision commenced its
providing better maintenance capacity, new smart cards
digital activities through the operator EchoStar, remain
enabling e-commerce and greater interactivity.
a priority market both in terms of present activities and
future opportunities.
Among the innovations that EchoStar introduced in 2000
is the “Starband” process, which is a two-way satellite
A strategic partnership has bound Kudelski and
link. The possibiliy of having a satellite return path is all
EchoStar together since the creation of a joint company,
the more interesting as it increases the opportunities
NagraStar, in 1998. Apart from the fact that it allows
for interactivity. In this way, EchoStar has introduced
a close follow-up on EchoStar as a major customer,
high-speed Internet Starband services in parallel with its
Nagrastar also represents a laboratory for new ideas
Dish Network programs.
in the field of digital satellite television.
DIGITAL CABLE: A MARKET WITH POTENTIAL
EchoStar broadcasts DTH (Direct-To-Home) programs by
For the Kudelski Group, the US digital cable market
satellite using a Nagravision system. The operator, which
represents a development area that complements the
has achieved rapid growth since the beginning of its
satellite sector.
activities, has more than 5 million subscribers. In order
to carry the number of channels that it broadcasts (cur-
Currently, digital and analog cable represents approxi-
rently more than 500), the operator has launched satel-
mately 70 million subscribers.
lites at an impressive rate: from EchoStar I in 1995 to
EchoStar VI in June 2000. Two further satellites are
As digital TV becomes more widespread, cable techno-
planned for 2001 and 2002.
logy possesses outstanding growth potential. Industry
analysts forecast that US cable will grow as a pay TV
digital market at about 15 million decoders per annum
for the next 3-5 years.
DIGITAL TELEVISION
CORE BUSINESS
ANNUAL REPORT 2000
KUDELSKI GROUP
44
In addition, the US Federal Communication Commission
In Mexico, the Kudelski Group’s second most important
has launched initiatives aimed at opening the retail mar-
market of Latin America, PCTV (an association of cable
ket for set top boxes and integrated digital TVs to the
operators) installed the first phase of a system equipped
cable subscriber, who would therefore no longer have to
with a Nagravision solution.
rent these devices (without any choice over the brand)
from their television service provider, as they do currently.
PCTV’s programs are sent via satellite to the operators
This situation would benefit the consumer electronics
throughout Latin America belonging to the association
producers with established brand equity.
who then broadcast them through their cable networks.
The importance of the digital cable market and its expan-
PCTV’s operations have a strong potential for development.
sion open a realm of opportunities that the Kudelski Group
is already looking into. An end-to-end solution designed
Overall the Mexican market offers great potential in the
for this sector is currently under development.
cable sector.
CENTRAL AMERICA AND SOUTH AMERICA
ASIA
Nagravision continues to make progress in the markets
The principal countries of Asia possess highly developed
of Central and South America. The establishment of a
infrastructure in the field of analog cable TV. The switch
Nagravision representative office in Sao Paulo, Brazil,
to digital TV that is starting to take place, stimulated by
is making contacts more convenient over the continent
new interactive applications, is opening up significant
as a whole.
opportunities which should be explored actively.
In Brazil, Nagravision has gained new customers who are
Over the course of the year 2000, the Kudelski Group
currently in the process of setting up their operations.
once again intensified its activities in this part of the
Acom, who has been equipped with a Nagravision sys-
world, notably by increasing its technical and commercial
tem since 1999, is continuing to grow after obtaining
staffing in the region. Nagravision has now dedicated
new MMDS broadcasting concessions.
sales structures in China, in Singapore and in India.
THE PRINCIPAL COUNTRIES OF ASIA POSSESS HIGHLY DEVELOPED INFRASTRUCTURE IN THE FIELD OF ANALOG CABLE TV.
THE SWITCH TO DIGITAL TV THAT IS STARTING TO TAKE PLACE,
STIMULATED BY NEW INTERACTIVE APPLICATIONS, IS OPENING
UP SIGNIFICANT OPPORTUNITIES
45
CONTINUOUS PROGRESS IN CHINA
A strong sense of rivalry can be anticipated between the
With its 80 million cable subscribers, China represents
satellite and cable technologies, which both complement
a priority market in which Nagravision has recorded fur-
one another and are in competition. This situation will
ther success. The agreement reached in 1999 with the
further the trend towards digital and its new interactive
Chinese group DVN Holdings (formerly DVB Holdings) in
services which are perceived as genuine commercial
Hong Kong to equip six cable networks with conditional
assets.
access systems for digital TV was extended to cover new
orders in 2000. It now encompasses eleven sites, inclu-
Nagravision made its debut in this market thanks to
ding the Shanghai Cable TV network which has around
agreements concluded with two suppliers of satellite
3 million subscribers.
programmes that are redistributed through cable, B4U
and SaBe TV.
Another important agreement was signed with NTC in
Chengdu for the installation of Nagravision CAS, NVOD
TAIWAN, A MARKET WITH GREAT POTENTIAL
and SMS systems.
Together with China and India, Taiwan is one of the
Asian markets with most potential for Nagravision, which
STRONG MARKET POSITION IN THE PHILIPPINES
first became active there in 1998 when Mega Media
Nagravision holds a very strong position across the
Broadcasting Network purchased a system.
archipelago, one strengthened in 2000 through the
conclusion of contracts with two new customers: PMSI
This operator was Nagravision’s first major customer of
(CAS and SMS systems) and ABS-CBN (CAS system),
the digital era in Asia. Interesting perspectives lie ahead
which is also active in the Middle East.
for Nagravision in this country, particularly in the cable
sector.
The Philippines are mainly equipped with satellite
networks.
In addition, Nagravision has continued its technological
integration activities with Taiwanese decoder manufac-
NEW MARKET CONDITIONS IN INDIA
turers: Mentor and Eastern now add to Visionetics,
The liberalization of satellite licences, which until now
a Nagravision partner of three years standing.
had been reserved for the government, changes market
conditions in this enormous country counting no fewer
Similar integrations have taken place in Korea with
than 70 000 cable operators.
Samsung and Humax.
ACCOUNTS – CONSOLIDATION, COST PLANNING, BALANCE SHEET PRODUCTION, PROFIT/LOSS
CALCULATION, COVERING EXCHANGE-RATE RISKS, ASSET MANAGEMENT, OPTIMIZATION OF
PERFORMANCE LEVELS, INVESTMENT
QUALITY TESTS – TESTING FUNCTIONS, VALIDATING CUSTOMER CONFIGURATIONS, GUARANTEEING
TESTS CAN BE REPRODUCED, SPECIFICATION, TRANSFER, INTEGRATION, MIGRATION, ADDRESSING
RESULTS, SOFTWARE INSTALLATION
BROADBAND NETWORKS
NEW FIELDS
FOR DEVELOPMENT
51
With the convergence of television and the Internet,
Tried and tested over a number of years, security tech-
the technologies developed for pay TV interest other
nology developed for conditional access television can
content suppliers and aggregators such as telecom net-
easily be transposed into the world of broadband
work operators, communications groups, entertainment
Internet.
businesses etc.
This opens up a vast range of opportunities for the
Aside from the broadcasting of a greatly increased num-
Kudelski Group as security requirements for the trans-
ber of channels, this situation involves the development
mission of high value added digital content are on a par
of a mass market for services such as video on demand,
with the massive scale on which they are distributed over
on-line music and games, Internet navigation, e-mail,
broadband networks.
e-commerce, e-banking, TV program guides etc.
Consumer demand is becoming more complex, requiring
more speed, more content and more interactivity.
The problem of security on a large scale has been one
to which Kudelski has dedicated its savoir-faire for more
than a decade. Few companies can compare with the
Kudelski Group for experience in the distribution of
secure content to millions of subscribers.
MARKET TRENDS
– Greater speed of access to Internet networks: from 56k modems to xDSL, cable modems, fiber optics,
FTTH (Fiber-To-The-Home), etc.
– Additional content: from audio-video content to multimedia content (TV, radio, MP3, games, software,
HTML pages etc.)
– Increased interactivity: from TV and radio programs to multimedia on demand
– A single IP standard: convergence of video, audio and data streams over a single standard:
IP (Internet Protocol)
KUDELSKI
AND DIGITAL SECURITY
APPLICATIONS
NETWORK OPERATOR
OPERATING PLATFORM
CONTINUOUS STREAMS
STREAMING ENCRYPTION
Digital TV and radio channels
HTML content
52
Stock market listings
Intranet, etc.
ON-DEMAND CONTENT
PRE-ENCRYPTION
DISTRIBUTION
Video (films, VOD)
Audio
LOCAL SERVERS
Games
Software
LOCAL SERVERS
HTML data or any MOD
(Multimedia On Demand) application
LOCAL SERVERS
NAGRAVISION SOLUTIONS
SECURE ACCESS TO INFORMATION
CAS (Conditional Access System)
SMART CARDS
CONTENT/SUBSCRIBER MANAGEMENT
IMS (Information Management System)
SMS (Subscriber Management System)
BROADCASTING MANAGEMENT
TSS (Traffic & Scheduling System)
INTERACTIVITY MANAGEMENT
interactive solutions
E-t-m-commerce
IP network security
GLOBAL “TURNKEY” SOLUTIONS
integration of complete systems
END USER
BROADBAND IP NETWORKS
HOME GATEWAY
cable
DIGITAL TV
xDSL line
fiber optics
satellite
53
DECODER OR PC
MMDS
with hard disk
hertzian channels
without hard disk
GAMES CONSOLE
HAND-HELD COMPUTER
(PDA)
PERSONAL
COMPUTER
BROADBAND NETWORKS
ANNUAL REPORT 2000
54
KUDELSKI GROUP
WHICH TYPES OF
BROADBAND NETWORK?
Competitors are numerous in the field of broadband
There is a similarly broad range of solutions, with ever
networks: cable network operators, telecommunications
faster data streams. Speeds exceeding 1 Mbps
and mobile phone businesses and even electricity
(megabyte per second) are required to achieve a smooth
companies.
transmission of images (for the purposes of comparison:
0.056 Mbps for a standard telephone line with an analog
modem versus 0.128 Mbps for an ISDN line).
FROM THE DECODER TO THE HOME GATEWAY
With the advent of “multimedia on demand”, the decoder will need to provide a considerably wider range of
functions. Taking on the form of a true home computer, it will become a digital pathway which, when linked
to the broadband network, will simultaneously fulfill the functions of a modem, a decryption device, a tuner,
a microprocessor, a payment terminal and a storage unit (it has a hard disk). All interactive terminals will be
connected to it, forming a home network: TV set, telephone equipment, games consoles, home automation
equipment and remote monitoring etc.
Like traditional decoders, the home gateway will be coupled with a smart card providing not just access
control but security for interactive transactions: on-line shopping, e-banking operations etc. Moreover this
card will offer a universal facility: it will be possible to use it on other terminals outside the home.
INTERACTIVE BROADBAND NETWORKS
NAME
CABLE MODEM
TYPE OF CONNECTION
A hybrid fiber/coax (HFC) or all-
OUTWARD
RETURN
CHANNEL
CHANNEL
Mbps (*)
Mbps (*)
Very fast
100
10
Very fast
100
100
SPEED (*)
coax cable communications network – a solution well established
in many markets
FTTH – FTTB
Solutions based on fiber optic lines,
Fiber To The Home / To The
increasingly used in telephony
Building
SATELLITE
RF (Radio Frequency)
Very fast
45
0.4
XDSL
Solutions for copper telephone
Fast
from 0.256
0.256
(the “x” prefix refers to
lines
to 2
the different versions of DSL
technology: ADSL, VDSL, etc.).
UMTS
Solution linked to mobile access:
Universal Mobile
hertzian channel
Fast
2
2
55
Telecommunications System
PLC
Use of electricity lines onto which
Power Line Communication
the digital signal is superimposed.
Fast
1
1
Solution for copper telephone lines
Slow
0.128
0.128
GPRS
Solution linked to mobile access:
Slow
0.128
0.128
General Packet Radio Service
hertzian channel
GSM
Solution linked to mobile access:
Very slow
0.096
0.096
Global System for Mobile
hertzian channel
This technology is still in its
infancy but shows signs of promise
ISDN
Integrated Services Digital
Network
communication
NON INTERACTIVE BROADBAND NETWORKS
NAME
TYPE OF CONNECTION
SPEED (*)
OUTWARD CHANNEL
Mbps (*)
MMDS
Solutions using very high fre-
Microwave Multipoint Distribution
quency hertzian channel
Very fast
45
Very fast
45
System
LMDS
Solutions using very high fre-
Local Multipoint Distribution
quency hertzian channel
System
(*) Indicative values
BROADBAND NETWORKS
ANNUAL REPORT 2000
56
KUDELSKI GROUP
NEW SECURITY
ISSUES
FROM BROADCAST TO BROADBAND
GUARANTEED SECURITY AT EVERY LINK IN THE CHAIN
Traditional transmission networks (broadcasts) are
The issue of security for multimedia transmissions is of
well-suited to the distribution of continuous audio-visual
a very specific nature when it comes to IP networks.
streams, particularly in the context of television. However
this means of distribution is less suited to operating
In the case of broadcast networks, the same content
interactive applications.
(television programs) is distributed in an identical fashion
to everyone. The audio-visual content, traveling over an
At present we are seeing the establishment of broadband
MPEG2 stream, is encrypted at the very moment when
networks, particularly those using the IP norm, which
it is broadcast. The decoder and smart card ensure that
allow for the high-speed transmission of high value-
the signal is unscrambled by subscribers only. In this
added interactive multimedia content.
context, the principal cause for concern on the part of
operators relates to the prevention of illegal decryption.
Numerous applications are covered by this technology:
television on PC, video on demand or multimedia on
For a broadband network in contrast – and especially
demand over the Internet, distance learning, business
where this relates to video on demand – content sup-
TV, etc.
pliers require a greater degree of protection so as to
ensure that the data (films for VOD, multimedia content)
The increased opportunities offered by broadband brings
is not received, copied and redistributed illegally. In this
with them a new form of behaviour among consumers:
context, in addition to the concern over illegal decryption
while before they sat passively in front of their TV sets,
there is another relating to the prevention of illegal copy-
they are now taking on an active (and even “interactive”)
ing, so as to guarantee copyright protection.
role. They are demanding access to a wider range of
content and expect to benefit from a greater level of
freedom: this in turn is stimulating a growing interest in
on-demand services.
NAGRAVISION:
THE SOLUTIONS
57
PRE-ENCRYPTION TO GUARANTEE BETTER
FINGERPRINTING AND WATERMARKING: ADDITIONAL
COPYRIGHT PROTECTION
PROTECTION
In order to respond to the concerns of operators, over
Additional measures can be taken for copyright protection
the year 2000 Nagravision developed digital pre-encryp-
purposes:
tion technology to be located at the very top of the
– fingerprinting, which involves placing a physical mark
transport chain (e.g. with the film producer).
on the content (e.g. insertion of a number)
– watermarking, a digital watermark formed using lines of
Thanks to this technology, content remains encrypted
code that are undetectable to potential hackers, but that
from the moment of its creation until it is used.
can be distinguished by the copyright owner.
Furthermore, the fact that it is stored in encrypted form
on the hard disk of the user’s decoder forestalls the dis-
These two techniques are at the research stage at
tribution of illegal copies: only a subscriber who has paid
Nagravision.
to receive a film, for example, will be able to watch it
using his decoder in tandem with a smart card containing
In parallel to these developments, Nagravision is continu-
the decoding keys.
ing the efforts it has made over the last two years to
refine its IP encryption technology.
In this way Nagravision is offering a response to the
question of copyright protection.
FROM CAS TO DRM – DIGITAL RIGHTS MANAGEMENT
Pre-encryption has been used in particular in connection
DRM is an extension of the conditional access system
with the Nagravision security solution developed for VOD.
(CAS) designed for broadband networks.
It can be used for all multimedia on demand content sold
via an IP (broadband) or DVB (broadcast) network.
Just like the CAS, it allows the user the right of access
to a given content by means of a very specific terminal
(their decoder). In addition, however, DRM controls the
distribution of this content over networks. Thus, by
obtaining licences, the subscriber – who now becomes
a distributor – could for example transmit data received
to other users.
Nagravision is working to develop a DRM product based
on the proven technology used in its CAS products.
MULTIMEDIA ON DEMAND
PRE-ENCRYPTION
PERSONAL
COMPUTER
DIGITAL
STREAMING
58
SERVERS:
REAL MEDIA
BROADBAND
QUICK TIME
IP NETWORK
MICROSOFT
DIGITAL TV
DECODER
MEDIA
MPEG-1
MPEG-2
MOBILES: UMTS
TELEPHONE, PDA,
ETC
DIGITAL
ENCRYPTION
STORAGE
CONTENT
+ WATERMARKING
OF CONTENT IN
ENCRYPTED FORM
CAS
CONDITIONAL
ACCESS SYSTEM
Nagravision hardware
Nagravision software
MULTIMEDIA ON DEMAND
STREAMING ENCRYPTION
PERSONAL
COMPUTER
DIGITAL
59
STREAMING
BROADBAND
SERVERS :
LIVE DIGITAL
REAL MEDIA
STREAMING
CONTENT
QUICK TIME
ENCRYPTION
IP NETWORK
DIGITAL TV
DECODER
MICROSOFT
MEDIA
MPEG-1
MOBILES: UMTS
MPEG-2
CAS
TELEPHONE, PDA,
CONDITIONAL
ETC
ACCESS SYSTEM
Nagravision hardware
Nagravision software
NEW SOLUTIONS – BEING WATCHFUL, ANALYZING THE MARKET, IDENTIFYING INNOVATIONS, APPRAISING
ADDED VALUE, DEFINING THE PROCESS SEQUENCE CLEARLY, FOCUSING ON THE TARGET, CREATING
INNOVATION AND SURPASSING ONESELF IN IMPLEMENTATION, PRESENTING AND IMPLEMENTING
SOLUTIONS, OPTIMIZING THE RE-USE OF ACQUIRED KNOW-HOW
DECODERS – DEVELOPING MODULES, INTEGRATING CONDITIONAL ACCESS, TESTING THE DECODERS,
MANAGING PROJECTS, ANALYZING PROBLEMS, DEVELOPING THE USER INTERFACES OF TOMORROW,
IMPROVING THE TELEVISION EXPERIENCE OF TELEVISION VIEWERS, PERSONALIZING USER INTERFACES
SMART CARDS
DIVERSIFICATION OF
A PROVEN TECHNOLOGY
65
Within the field of pay TV itself, the smart card has
Three major fields can be identified today: e-commerce,
developed extremely rapidly. From a simple access key
which is linked more and more to interactive TV, physical
opening and closing the lock of the decoder, it has
access control systems and systems based upon secure
become the central element in an intelligent communica-
databases.
tion system, responsible among other things for user
identification and authentication, signal decryption, provision of security for transactions, and the exchanging and
VIGOROUS EXPANSION IN THE SMART CARD MARKET
storing of data.
The explosion in interactive transactions of every sort is
rendering more and more necessary the use of smart
These functions, which enable interactivity of digital TV,
card-based security solutions.
are the same as those that have allowed the Kudelski
Group to design innovative security solutions in new
Growth of 28% per annum in this market is forecast over
activity sectors.
the next four years, meaning that the number of units distributed worldwide will exceed 5,000 million.
SMART CARDS
ANNUAL REPORT 2000
66
KUDELSKI GROUP
PHYSICAL ACCESS
CONTROL SYSTEMS
Kudelski smart cards are also revolutionising the
Hands-free access control, decentralized processing
approach to security where this involves controlling indi-
of photos and identity checks thanks to computerized
vidual access to facilities ranging from official buildings
photos displayed at the control are just a few examples
to cinemas, and conference halls to ski-lift installations.
of the services that the Kudelski smart card can provide.
Representing so much more than simply a tool for con-
Other features include the high-powered calculation
trolling who comes in or goes out, the Kudelski smart
capability that the system offers for data processing and
card is at the heart of an access management system
the evolutional nature of the product which can be con-
that interfaces with the intercommunicative functions that
tinuously adapted to meet the needs of operators.
make the system so powerful.
E-T-M-COMMERCE: A MAJOR PRIZE OF CONVERGENCE
Given the massive economic stakes involved, e-commerce is the field around which, in recent years, security
issues have taken on the greatest importance. Fraud already takes place on an astonishing scale – estimated
at more than 3 000 million dollars per annum.
Among the various approaches put forward, the Kudelski smart card is today considered to be one of the
most convincing solutions due both to the high level of security it provides and to the other technical and
marketing functions that it offers, functions that have already transformed the way in which interactive TV
is perceived today.
With this card, Kudelski offers a universal approach to transactions, as the same card can be used on
terminals as different as the TV decoder, the PC or even the mobile phone.
Here again convergence is breaking down frontiers: after e-commerce, we now have the era of t-commerce
(TV receivers) and m-commerce (mobile phones).
In order to meet these new requirements, the technology contained within the Kudelski smart card can take
different forms and be adapted to different media. It can, for example, be equipped with a USB connection and
interface, bypassing the need to add card readers to PCs. The chip itself can also be integrated directly within
systems and be subject to remote upgrading over the IP network.
THE FUNCTIONS WHICH ENABLE INTERACTIVITY OF DIGITAL TV
ARE THE SAME AS THOSE THAT HAVE ALLOWED THE KUDELSKI
GROUP TO DESIGN INNOVATIVE SECURITY SOLUTIONS IN NEW
ACTIVITY SECTORS
67
TICKETING AND ACCESS CONTROL FOR
SPORTACCESS KUDELSKI CARDS
LEISURE FACILITIES
Ski resorts are a good example of one area in which a
MOVIE CARDS
contactless smart card access control system has been
This was the first application that the Kudelski Group
turned to excellent account.
developed outside the realm of pay TV. Introduced in
1997, it has allowed the Swiss cinema chain, Métrociné,
The hands-free video-controlled SportAccess Kudelski
to offer subscription access cards equipped with market-
system has brought the skier genuine convenience and
ing functions aimed at winning customer loyalty: advance
has contributed to a smoother flow of individuals through
booking options to avoid queuing, awarding of bonus
control gateways. It has also demonstrated its reliability
points etc. The system has millions of transactions to
in particularly difficult conditions of use (cold, damp etc.)
its credit.
Thanks to the wide range of functions that it may include
and to the flexibility in subscription design that it offers,
this technology has opened up new commercial
opportunities. In particular it has stimulated the creation
of products such as the multi-resort card or the “tourist
passport” allowing access, within a region, to a whole
spectrum of leisure facilities.
SportAccess Kudelski systems are used by than 650
customers in Europe and worldwide.
SMART CARDS
ANNUAL REPORT 2000
KUDELSKI GROUP
68
PHYSICAL SECURITY AT EVENTS
NagraCard badge cards function without physical con-
WORLD ECONOMIC FORUM
tact with the reader. They allow participants to be identi-
Major events represent another field within which
fied, contain various information about the cardholder
NagraCard physical access control technology has
and their status (guest, press, staff etc.) and manage the
staked a claim to be a product that both guarantees a
validity of the authorizations as well as the level of
high level of security and promotes effective organization.
access granted.
The World Economic Forum, which each year brings
New functions were introduced for the January 2001
together in Davos a whole range of world figures, has
edition, including the storage on the badge of rights of
entrusted the security of its physical access system to
access to different sessions. This facilitates the move-
NagraCard technology since 1999.
ments of participants (no more presentation of tickets)
and alleviates the burden upon the organizers.
REPRESENTING SO MUCH MORE THAN SIMPLY A TOOL FOR CONTROLLING WHO COMES IN OR GOES OUT, THE KUDELSKI SMART
CARD IS AT THE HEART OF AN ACCESS MANAGEMENT SYSTEM
THAT INTERFACES WITH THE INTERCOMMUNICATIVE FUNCTIONS
THAT MAKE THE SYSTEM SO POWERFUL
69
UNITED NATIONS – GENEVA 2000 CONFERENCE
INSTITUTIONS AND GOVERNMENT BODIES
NagraCard provided a security management service
UNIVERSITY CARD
(accreditations, badges, network etc.) for this interna-
At the end of the year 2000, Neuchâtel University in
tional conference dedicated to world social development.
Switzerland opted for a NagraCard system to replace its
14 000 people took part.
traditional student identity cards.
SALON INTERNATIONAL DE LA HAUTE HORLOGERIE
Aside from its role as an identity card, the new smart
2001 (INTERNATIONAL FINE WATCHMAKING
card has also been designed to operate as a recharge-
EXHIBITION 2001) IN GENEVA
able electronic purse allowing payment to be made, for
This trade fair, an invitation-only event, brings together
example, for photocopies and printing carried out on
firms that are the leading names in Haute Horlogerie. It
self-service machines distributed across the campus.
attracts some 10 000 individuals, buyers and professionals. Once again the performance levels and reliability
A barcode featured on the card also allows the bearer to
of NagraCard solutions have convinced the organizers.
borrow items from any library forming part of the regional
network.
During phase two, the university plans to extend the use
of the card to cover the secure control of access to
buildings and I.T. equipment.
SMART CARDS
ANNUAL REPORT 2000
70
KUDELSKI GROUP
SYSTEMS USING
RELATIONAL DATABASES
Given the proliferation in computerized administrative
Complicating matters still further, it must be possible
and commercial databases which are moreover univer-
for certain databases to be held on an anonymous basis,
sally accessible over networks, individuals are becoming
as for instance is the case with distance voting systems
ever more concerned to protect their private lives.
(e-voting): where such a process applies, the authorities
must be in a position to authenticate the identity of
Every individual wishes to benefit from this development
individual voters and calculate voting results, without
in order to simplify his or her life while also retaining
however being able to make any connection between
complete control over personal data.
the individual voter and how they have voted.
This is a field in which security issues relate not only
Kudelski has developed a new concept in secure rela-
to problems of identification upon access (who has the
tional databases that ensures content protection at the
right to access a database) but also to problems of con-
level of the server on which it is stored. Thus, even if
trol over levels of access (who has the right to see what).
someone is capable of accessing the database, they will
be unable to make use of the information it contains
unless they possess the “open sesame”, the Kudelski
smart card.
WHAT IS A RELATIONAL DATABASE?
In a relational database, information is organized according to criteria that are laid down in advance and that
are brought together when a search is made. This allows direct access to data as if you are dealing with items
on the index of a vast library.
This deductive approach increases the intelligence of the system, in comparison with databases of the hierarchical or “network type”, which simply lead you “passively” to one or other item of information via a series of
links in a chain.
GIVEN THE PROLIFERATION IN COMPUTERIZED ADMINISTRATIVE
AND COMMERCIAL DATABASES WHICH ARE MOREOVER UNIVERSALLY
ACCESSIBLE OVER NETWORKS, INDIVIDUALS ARE BECOMING EVER
MORE CONCERNED TO PROTECT THEIR PRIVATE LIVES
71
E-GOVERNMENT
HEALTH CARD
By taking a holding, in late 2000, in the company
The latest development in Kudelski smart cards, the
Polirights, the Kudelski Group is creating the potential
personalized health card gives the cardholders exclusive
for its work in the field of security to serve the needs of
control over data from their file. It is the key that confirms
the cyber-governments that are starting to be set up.
a patient’s identity and allows him or her to attain secure
access to personal data remotely.
E-voting, as described above, is a service that is currently attracting a lot of attention at state level. However
Combined with the new secure relational database
the demand also covers numerous other applications:
concept, the card offers complete protection of confi-
administrative procedures (public records offices, tax
dentiality in respect of the cardholder’s personal details.
declarations, driving licences, military service, school
These are stored in the database in an anonymous
registrations etc.), transactions linked, for example, to
manner and in a partial form and their complete structure
the payment of taxes, censuses etc.
is only obtained when accessed in combination with the
smart card.
The Polirights solution comes within the scope of the
media convergence process between Internet, television
The patient exercizes control over the use of this card
and mobile phone and thus allows official bodies to
by means of “virtual locks” that are released according
achieve greater proximity to the public and to offer them
to the nature of the party to which the file is sent: doctor,
personalized, interactive services.
health insurance service, chemist etc. In this way each
party only accesses those aspects of the file that con-
Over the coming years we can anticipate the advent of
cern them.
citizen cards that can be used on PCs, decoders and
mobile phones.
Not only does the health card provide better protection
of an individual’s private details but it also offers greater
reliability when transmitting information.
The company e-prica SA, created by Kudelski and the
Swiss pharmaceutical group Galenica as equal partners
in early 2001, is in charge of development work in this
field.
MANAGEMENT OF ACCESS AUTHORIZATION – MANAGEMENT OF SUBSCRIBER ACCESS AUTHORIZATION,
ENSURING COHERENCE OF RIGHTS GRANTED, COLLECTING IMPULSE PURCHASES, MAINTAINING
A HISTORICAL RECORD OF TRANSACTIONS, DEVELOPMENT OF UPGRADEABLE SYSTEMS
CUSTOMER SUPPORT – INTEGRATING AND IMPLEMENTING ACCESS AUTHORIZATION SYSTEMS, FAST
AND VERY FAST REACTION, ELABORATING SOLUTIONS FOR THE PREVENTION OF POTENTIAL PROBLEMS,
OBSERVING BEHAVIOR AND DIAGNOSING FAULTS, TRAVELLING FIVE CONTINENTS IN LESS THAN 80 DAYS
NAGRA AUDIO
A STIMULATING
ENVIRONMENT
77
DYNAMIC OF EXPANSION CONFIRMED
A RICH VEIN OF SUCCESS
New markets, new applications, new products and new
Sales of the Nagra-DII recorder continued to thrive. This
marketing activities; adding to that changes in internal
recorder has rapidly forged itself a reputation for excel-
organization and the transfer of the sales and marketing
lence among users also within new application fields
team to the new building acquired by the Group two
outside the traditional cinema market.
years ago; the year 2000 has confirmed the vigor of
Nagra Audio that was experienced in 1999.
Towards the end of the year 2000, the scale of the success of the ARES range of recorders led to temporary
Now working together in extremely well-equipped
stock shortages. The new handheld Nagra ARES-P and
premises that offer an ideal degree of proximity to the
RCX220 versions, in particular, have been very much
production, after-sales and logistics sections, the Nagra
in demand.
Audio teams are perfectly placed to serve customers
with maximum efficiency.
As regards hi-fi products, the introduction of the new
Nagra PL-L preamplifier, which now enjoys distribution
extended to cover new geographical markets, won the
admiration of specialists and audiophiles throughout
the world. This equipment has won several prestigious
awards.
Collaboration between Nagra Audio and the Montreux
Jazz Festival in Switzerland started in 2000 with several
high-quality recordings being made on the Nagra-DII,
including of the Montreux Jazz Solo Piano competition.
This partnership will be even more itensified in 2001
by Nagra entering as one of the official sponsors of
the festival.
NAGRA AUDIO
ANNUAL REPORT 2000
78
KUDELSKI GROUP
EXPANDING
THE PROFESSIONAL
PRODUCT RANGE
A CONCENTRATE OF HIGH TECHNOLOGY: NEW ARES
As with all other machines in the Nagra range, ARES-P
HANDHELD RECORDERS
recorders are designed to operate with absolute reliabi-
The year 2000 was marked by the launch of two new
lity even under the strictest environmental conditions.
audio-digital pocket-sized recorders: the ARES-P and
Their high-quality sound, simplicity of use and rugged
the RCX220.
construction are in line with the uncompromisingly high
standards that the company has set itself in the field of
This equipment, which weighs less than 500 grams and
professional audio equipment since the day it was created.
can be held in the palm of the hand, has been developed
to meet the needs of radio reporters. These tapeless
Still five years after its market introduction, sales of the
recorders store up to three hours recording time in a
ARES-C recorder once again increased substantially.
detachable flash memory, which can then be inserted
This confirms the fact that the ARES-C is the reference
into equipment used for editing, such as the Nagra
recorder for journalists in many radio stations in Europe.
ARES-C or Nagra ARES C-PP.
The recent launch of the ARES-P and RCX220 allowed
In contrast to the ARES P, the RCX220 version incorpo-
the company to strengthen its overall product range in
rates an additional USB port for the direct transfer of
the radio applications segment, which had the effect of
digital files to PC or laptop.
stimulating sales of all recorders in the ARES range.
THEIR HIGH QUALITY SOUND, SIMPLICITY OF USE AND RUGGED
CONSTRUCTION ARE IN LINE WITH THE UNCOMPROMISINGLY
HIGH STANDARDS THAT THE COMPANY HAS SET ITSELF IN THE
FIELD OF PROFESSIONAL AUDIO EQUIPMENT SINCE THE DAY IT
WAS CREATED
79
THE NAGRA-DII AUDIO-DIGITAL RECORDER:
An interesting new market for the Nagra-DII was also
FAVORITE OF FILM MAKERS
identified during 2000, that of instrumentation (measure-
Although it took place in 1999, it was over the course
ment of noise and vibrations). Nagra Audio had not been
of the year 2000 that the launch of the Nagra-DII audio-
active in this field since the famous Nagra SJ and TI
digital recorder really had an impact in cinema and music
machines back in the 1980s. A number of sales of the
circles. Sales are up 20% in comparison with the
Nagra-DII have been achieved in this market. The auto-
previous financial year.
mobile and aeronautical industries have also opted for
a slightly modified Nagra-DII for measurement purposes.
The North American cinema industry was its leading
The multiple channel concept, the excellent extended
market, accounting for more than half the annual sales.
frequency response and the portability were the principal
The traditional qualities of Nagra equipment – reliability,
reasons for choosing the machine.
manufacturing quality and performance levels – explain
the consistent success of the recorder in cinema
The growing interest in high bit rate recording and the
applications.
adoption of the 96kHz sampling frequency by the professional and consumer audio industries are two factors
In particular, the Nagra-DII has been used in many major
contributing to the continuing success of the Nagra-DII,
productions, such as “The Patriot“ with Mel Gibson and
despite the trend towards computer-based audio
“Autumn in New York“ starring Richard Gere.
technologies.
NAGRA AUDIO
ANNUAL REPORT 2000
80
KUDELSKI GROUP
NAGRA HI-FI:
FOR THE BEAUTY OF MUSIC
In the high-fidelity field, the notion of quality extends
The Nagra range now comprises four of the models that
well beyond mere technical matters. Because the real
are rated most highly by music lovers:
challenge we face is emotional in nature: it involves
– the battery-powered PL-P preamplifier (version without
reproducing music in its entirety and, above all, commu-
phono stage launched in January 2001 under the name
nicating all the life and emotion that it contains.
PL-L). Named as the “Best purist preamplifier” in the
Best of the Best chart produced by the prestigious
Nagra hi-fi equipment is designed much as an instrument
maker creates a violin: through the use of the finest
Robb Report
– the VPA amplifier, which combines the most sophisti-
materials, complete mastery of craft and style, and the
cated technology with the irreplaceable magic of
quest for perfect sound quality.
vacuum tubes. Judged “Best all-tube medium power
amplifier” by the Audio Art magazine
– the MPA modular-design transistor amplifier. Received
the celebrated COTY (Component of the Year) Award
in Japan
– the SNST-R miniature recorder, a true technological
gem specially designed for high-quality musical
recordings
The success achieved by this range of equipment
encouraged Nagra Audio to continue expanding its international distribution network in 2000.
“FROM BEGINNING TO END, THE MUSIC IS ALL YOU HEAR; YOU
ARE WITHIN IT AND IT IS WITHIN YOU. PERHAPS IT IS BECAUSE
THE MUSIC FINDS THAT SPECIAL PLACE WHERE BODY MEETS
SOUL”
81
Nagra PL-P
Nagra VPA
Nagra-DII
Nagra ARES-P
preamplifier
amplifier
recorder
recorder
NAGRA AUDIO – MARKET EXPLORATION, ADVISING CUSTOMERS, GENERATING ENTHUSIASM
AND MOTIVATION OF SALES FORCE, SELLING, MAKING OFFERS, TAKING ORDERS, PRESENTING AND
PROMOTING OUR PRODUCTS, PERSUASION, LISTENING TO THE CUSTOMER, TRAINING THEM, MARKET
RESEARCH, DISCOVERING NEW APPLICATIONS, PROVIDING NEW IDEAS
AUDIO R&D – ANTICIPATING THE PRODUCTS OF THE FUTURE, GIVING CONCRETE EXPRESSION TO
IDEAS, DESIGNING PROTOTYPES, PREPARING FOR PRODUCTION, FUNCTIONAL OPTIMIZATION,
ACOUSTIC ANALYSIS, CHECKING OF FEATURES, RADIATION MEASUREMENT
ANNUAL REPORT 2000
86
KUDELSKI GROUP
HISTORICAL BACKGROUND
1951
Birth of the first portable recorder, the Nagra I.
1959
Release of the Nagra III.
1965
First Nagra SN (Série Noire) miniature device.
1984
First Nagra VPR-5 video recorder.
1986
The company is listed on the stock market.
1989
Canal+ adopts Kudelski’s access control system
1997
Nagravision (digital systems) breaks through
in Europe.
Digital pay television becomes the company’s
core business sector.
1998
Nagravision conquers the British cable market.
Creation of NagraStar, a joint venture with
EchoStar, and of NagraCard.
First systems offering mixed pay television/Internet
solutions
for pay television.
1999
Against a background of convergence between
television and other digital content, the Kudelski
1991
André Kudelski succeeds Stefan Kudelski.
Group creates the first broadband network
First million analog decoders sold.
encryption systems.
The company concentrates its activities on
Creation of MediaCrypt and investment in
conditional access television.
Nagra ID.
The company becomes a holding company.
1992
Creation of Nagra+, a joint venture between
Kudelski SA and Canal+.
2000
Kudelski stock listed on the SMI (Swiss Market
Launch of the Nagra-D, the first portable digital
Index) and on the MSCI (Morgan Stanley Capital
recorder.
International) Index.
Investment in SportAccess (ticketing) and in
1995
First order (from EchoStar) for a Nagravision
Polirights (electronic voting and cyber-
digital system, marking the arrival of Nagravision
administration).
on the North American market.
The Group continues to expand in the field of
secure distribution of digital content over
1996
85% of sales are achieved in the pay TV sector.
broadband networks.
DIRECTORY
87
KUDELSKI GROUP
SUBSIDIARIES
NAGRA+
SPORTACCESS KUDELSKI SA
HEADQUARTERS
NAGRAVISION SA
22, route de Genève
10, rue de l’Industrie
KUDELSKI SA
22, route de Genève
1033 Cheseaux
Case postale
22, route de Genève
1033 Cheseaux
Switzerland
1950 Sion
1033 Cheseaux
Switzerland
Tél. +41 21 732 03 11
Switzerland
Switzerland
Tél. +41 21 732 03 11
Fax +41 21 732 03 00
Tél. +41 27 323 09 10
Tél. +41 21 732 01 01
Fax +41 21 732 03 00
E-mail [email protected]
Fax +41 27 323 09 11
Fax +41 21 732 01 00
E-mail [email protected]
E-mail [email protected]
Nagra Audio division
NAGRASTAR LLC
www.nagra.com
E-mail [email protected]
22, route de Genève
E-mail [email protected]
www.sportaccess.com
1033 Cheseaux
POLITICAL RIGHTS SA – POLIRIGHTS
NAGRAVISION SA
Switzerland
7, avenue Krieg
Division R&D
Tél. +41 21 732 04 00
1208 Genève
Technoparkstrasse 1
Fax +41 21 732 04 01
Switzerland
8005 Zürich
Tél. +41 22 789 00 00
Switzerland
NAGRASTAR LLC
Fax +41 22 789 10 11
Tél. +41 21 445 39 40
90 Inverness Circle East
E-mail [email protected]
Fax +41 21 445 39 41
Englewood, CO 80112
www.polirights.com
E-mail [email protected]
USA
Tél. +1 303 706 57 00
e-prica SA
NAGRACARD SA
Fax +1 303 706 57 19
Untermattweg 8
22, route de Genève
E-mail [email protected]
3027 Berne
1033 Cheseaux
Switzerland
Switzerland
NAGRA ID SA
Tél. +41 31 990 81 11
Tél. +41 21 732 05 60
12, rue des Champs
Fax +41 31 990 81 12
Fax +41 21 732 05 61
Case postale 1419
E-mail [email protected]
E-mail [email protected]
2301 La Chaux-de-Fonds
www.e-prica.net
Switzerland
PRÉCEL SA – PRÉCISION
Tél. +41 32 924 04 04
ÉLECTRONIQUE
Fax +41 32 924 04 00
Vy-d’Etra 10
E-mail [email protected]
Case postale
2009 Neuchâtel
MEDIACRYPT AG
Switzerland
Technoparkstrasse 1
Tél. +41 32 753 56 56
8005 Zürich
Fax +41 32 753 58 67
Switzerland
Tél. +41 1 445 30 70
Fax +41 1 445 30 71
E-mail [email protected]
www.mediacrypt.com
ANNUAL REPORT 2000
KUDELSKI GROUP
88
NAGRAVISION SUBSIDIARIES
CHINA
NAGRA AUDIO SUBSIDIARIES
ITALY
SPAIN
NAGRAVISION SA
USA
NAGRA ITALIA Srl
NAGRAVISION IBERICA S.L.
SHANGHAI OFFICE
NAGRA USA, Inc.
Viale Europa, 55
Calle O’Donnell 32, 4C
Rm 7002, Overseas Chinese Mansion
240 Great Circle Road
I-00144 Rome
28 009 Madrid
129, West Yanan Road
Suite 326
Italy
Spain
Shanghai 200040
Nashville, TN 37228
Tél. +39 06 59 10 932
Tél. +34 91 504 51 13
People’s Republic of China
USA
Fax +39 06 59 10 932
Fax +34 91 573 20 59
Tél. +86 21 6248 0908
Tél. +1 615 726 5191
E-mail [email protected]
E-mail [email protected]
Fax +86 21 6248 5512
Fax +1 615 726 5189
E-mail [email protected]
E-mail [email protected]
NAGRAVISION
INDIA
GERMANY
3U Long Spring
2041 Rosecrans Avenue #350
NAGRAVISION
NAGRA KUDELSKI GMBH
Porters Wood
El Segundo, CA 90245
S-24/5, DLF, Phase 3
Tegernseer Landstr. 161
St. Albans Hertfs. AL3 6EN
USA
Behind DLF Corporate Park
D-81539 Munich
United Kingdom
Tél. +1 310 335 5225
Gurgaon, Haryana, 122001
Germany
Tél. +44 (0)1727 810 002
Fax +1 310 335 5227
India
Tél. +49 (0)89 697 1207
Fax +44 (0)1727 837 677
E-mail [email protected]
Tél. +91 981 014 9048
Fax +49 (0)89 691 1964
E-mail [email protected]
Fax +91 11 689 5744
E-mail [email protected]
USA
BRAZIL
NAGRA KUDELSKI (GB) LIMITED
E-mail [email protected]
NAGRAVISION
FRANCE
P/a Tecnoworld
NAGRA FRANCE Sàrl
Rua Beira Rio, 57, 8° andar
118/130, av. Jean-Jaurès
Sao Paulo, SP-CEP 04548-050
75019 Paris
Brazil
France
Tél. +55 11 38 46 60 01
Tél. +33 (0)1 42 03 9900
Fax +55 11 38 45 81 98
Fax +33 (0)1 42 08 8920
E-mail [email protected]
E-mail [email protected]
SINGAPORE
NAGRAVISION SA
302 Orchard Road
Tong Building # 07-02/#07-03
Singapore 238862
Tél. +65 836 6720
Fax +65 836 6717
E-mail [email protected]
UNITED KINGDOM